1. Lectures in Macroeconomics- Charles W. Upton The Federal Reserve System FOMC

2. The Federal Reserve System A Brief History Several bank panics in the 19 th century, especially 1893 and 1907. National Banking Commission established in 1907. After five years of study, recommended Federal Reserve System. President Wilson signed law establishing Federal Reserve System in 1913.

3. The Federal Reserve System The Basics of the System This is a “bank’s bank”. Only banks have accounts at Fed. Bank of England European Central Bank Bank of Japan

4. The Federal Reserve System The Basics of the System Twelve District Banks Atlanta Boston Cleveland Dallas Denver Kansas City Minneapolis New York Philadelphia Richmond St. Louis San Francisco

5. The Federal Reserve System The Basics of the System Twelve District Banks Board is one-third appointed by Board of Governors and two thirds elected by banks in district. Bank board elects its own president, subject to approval by Board of Governors.

6. The Federal Reserve System The Basics of the System Twelve District Banks Board of Governors Seven members, elected for 14 years terms (cannot repeat).

7. The Federal Reserve System The Basics of the System Twelve District Banks Board of Governors Seven members, elected for 14 years terms (cannot repeat). Chairman serves four year term

8. The Federal Reserve System The Basics of the System Twelve District Banks Board of Governors Seven members, elected for 14 years terms (cannot repeat). Chairman serves four year term All appointed by President, subject to Senate confirmation.

9. The Federal Reserve System The Basics of the System Twelve District Banks Board of Governors Federal Open Market Committee (FOMC) Seven members of Board of Governors President of NY District Bank and four other district presidents on rotating basis.

10. The Federal Reserve System The Basics of the System Twelve District Banks Board of Governors Federal Open Market Committee (FOMC) Seven members of Board of Governors President of NY District Bank and four other district presidents on rotating basis. This group sets monetary policy.

11. The Federal Reserve System The Basics of the System Twelve District Banks Board of Governors Federal Open Market Committee (FOMC) Seven members of Board of Governors President of NY District Bank and four other district presidents on rotating basis. This group sets monetary policy. The FOMC meets in Washington on Tuesday morning every six weeks throughout the year to review the economy's performance, and decides what action to take, if any, in regards to monetary policy.

12. The Federal Reserve System Independence of Fed 14 year terms District Banks have real independence and appoint 5 of 12 members of FOMC. President and Congress have little day-to- day control.

13. The Federal Reserve System Independence of Fed The designers of the Federal Reserve System were worried that political control of the monetary policy would cause wild swings in the money supply and macro instability.

14. The Federal Reserve System Independence of Fed The designers of the Federal Reserve System were worried that political control of the monetary policy would cause wild swings in the money supply and macro instability. Most economists approve of this degree of independence

15. The Federal Reserve System Independence of Fed The designers of the Federal Reserve System were worried that political control of the monetary policy would cause wild swings in the money supply and macro instability. Most economists approve of this degree of independence Some argue that the independence of the Federal Reserve System makes it unresponsive to the will of the majority.

16. The Federal Reserve System Independence of Fed The designers of the Federal Reserve System were worried that political control of the monetary policy would cause wild swings in the money supply and macro instability. Most economists approve of this degree of independence Some argue that the independence of the Federal Reserve System makes it unresponsive to the will of the majority. Factoid: Nations with independent central banks have lower inflation rates than nations where the central bank is subject to political control.

17. The Federal Reserve System End ©2005 Charles W. Upton. All rights reserved